Express Carriers: Getting Interesting

Takeaway: While early, we are getting interested in $UPS & $FDX on the long side. FDX may pull capacity. Lucrative USPS contract up for grabs.

Express Carriers: Getting Interesting

  • Express Carriers Long Out of Favor:  We have covered Fedex and UPS for a really long time and have not been interested in them for a really long time.  However, recent underperformance (i.e. valuation improvement) and a better cyclical set up is starting to make the group look more promising.
  • Capacity Reductions?:  Fedex appears to have added excess express capacity after the financial crisis and may announce its withdrawal at its October analyst meeting.  That capacity reduction, among other factors, could be a help to industry utilization and margins.
  • USPS Contract Up:  We also note that the Fedex USPS contract is up for grabs now.  UPS has a bid in.  It’s a ~$1 billion in revenue with above average margins, so it moves the needle – down for FDX if it loses the business.

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